Economist sees bright future for Elkhart County

By JESSE DAVIS
THE GOSHEN NEWS

October 16, 2008 11:01 am

— As the economic crisis rolls onward, Elkhart County residents continue to feel the pinch. So much so that a New York Times article called Elkhart “the white-hot center of the meltdown of the American economy.”
Jerrell Richer sees more than just a downturn, however. He sees a tremendous opportunity.
Richer is associate professor of economics at Goshen College. Like many people, he has watched the actions of Wall Street, the investment banking industry and Federal Reserve Chairman Ben Bernanke with interest. He agrees that many different factors helped lead our economic system to where it currently stands, but he tends to talk about one in particular.
Between 2002 and 2005, the housing industry was booming, with median home prices increasing by 16 to 21 percent each year. According to Richer, this led to some deregulation and a departure from traditional business practices in order to help people purchase houses. Interest-only loans became much more widely available, allowing home buyers to qualify for larger mortgages than they otherwise would have been able to afford. This led buyers to offer more and more for houses since they had access to more credit and wanted to ensure they got the house they wanted, according to Richer.
“Ironically, a tool intended to make housing more affordable for individual buyers caused a market-wide increase in housing prices that actually eroded overall affordability. In response to the rapid appreciation in prices in the early part of this decade, buyers had little choice but to rely on a growing range of alternative financing products, including negative amortization, where monthly payments do not even cover the interest charges in the early years of the loan,” Richer wrote in an October 2007 article on the topic.
That housing bubble began to burst in 2006 and has declined considerably since, adding to the economic turmoil.
Another concern
Another market that gives Richer “real concern” is energy production, both in the form of home power and fuel.
“We may see double-digit utility energy increases in the next two years,” he said.
In particular, he looks to oil.
“It seems likely that prices will continue to increase since the easy-to-access stocks have been depleted and we are forced to go deeper and farther to find new reserves. It is not a question of if world oil production will peak, but when,” Richer said in a speech to the Goshen Rotary in May.
Although gasoline costs have dropped significantly over the last month, he pointed out that it is largely an effect of the economic crisis and other temporary factors and will not last.
“This is the type of economic problem we had in the 70s,” he said, “except that was a political supply shock. This is a real supply shock. But the great thing about that is that we can fix this one.”
A silver lining
This is where the silver lining of the dark cloud that has been hovering over Elkhart County becomes visible, according to Richer.
“There are other things we can produce. We don’t have to stake our claim on RVs. Why can’t northern Indiana, why can’t Elkhart County, be a hub for alternative energy?” he said.
He argues that between the sheer manufacturing power of the area, as well as the current slowdown and the fact that many plants are closing or sitting inactive, puts the county in a unique position to come to the forefront of the green energy movement.
Solar panels are still mostly imported. The college’s Merry Lea Environmental Learning Center has a wind turbine to generate power, but it was manufactured in Oklahoma. Richer said that local companies should be making these types of products.
In discussing the national challenge to become energy independent in 10 years, he referenced President John Kennedy’s statement that we would go to the moon and the aura of hopeful intrigue that it created.
“It was a very exciting time because of NASA. All the kids followed the Apollo missions,” Richer said.
Now, he said, we should be using the same kind of atmosphere to get college students and kids excited by alternative energy.
“It can be really inspiring to people,” he said.
Richer received his bachelor’s degree from Goshen College in 1985 and later earned his master’s degree and doctorate in economics from the University of California Santa Barbara.

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